I read this posting in another forum so I thought I would post it in ET for your comments and discussion. ___________________________________________________ Avis & BT seem to think the way we 'got here' is through some mechanism of productivity vs debt as it relates to GDP. Or something like that. I'm sorry that's simply not correct. It ainât even close. How we got here isâ¦ the world banking system lead by Wall Street brokerage/banks/insurance companies created a world wide insurance scheme based on mortgage backed credit default swaps and derivatives of the CDS assets (aka toxic assets) that are on their books for many trillions dollars that NOW no one knows how to value. Fact is a very large percentage of these CDS derivatives may simply be worthless. The CDS assets are bundled âmortgage insurance policiesâ not the actual mortgages. The derivatives are a kind of stock based on the value of the underlying policies. The derivative stocks was traded so aggressively the stock price rapidly appreciated even though the underlying value of the insurance policies remianed unchanged. Everybody was making big BIG money selling insurance and trading stock. Everybody wanted a piece of the action. It spread like wildfire throughout the world financial markets (check out the Icelandic banksâ¦ Iceland !!) as a way to reduce risk and make a ton of money doing it. Where this scheme came off the tracks was when the deregulated financial companies morphed into âinsuranceâ companies, they were not required to carry requisite cash reserves against claims (unlike their heavily regulated REAL insurance company cousins). So even a minor up tick in mortgage failures caused huge âunanticipatedâ cash requirements that the brokerage banks couldnât cover. When that minor up-tick turned into a major up-tick they started dropping like flies. Thus Lehman Bros., Bear Stearns, Merrill Lynch et al. When the actual value and the implications of holding tons of CDS and derivative assets started to be recognized, the whole system locked up. Everyone had huge CDS exposure that couldn't be liquidated (sold) without committing corporate suicide (because theyâd have to be sold at a small fraction of their booked value). Remember the term âilliquid assetsâ ? There you go. Thatâs what they were talking about. Credit locked up. Who in their right mind would be lending money to another financial institution who could go bankrupt at any time, without notice ?? Remember when this thing first broke ? Remember the glazed over look they all had after their initial briefing at the GW White House. They were stunned !! They had no idea how to fix the problem. They/we still donât ! Believe me we won't be able to print enough dollars, pounds, euros, yen combined to 'buy up' what could be 20- 50 trillion dollars of worthless credit default swaps. It ainât gonna happen ! So what to do ?? I ainât gotta clue. The reason everyone close to the issue is willing to throw so much money at the economy is to give them time to figure out how to purge that much money off the bankâs books without causing the whole thing to collapse. They are buying time. Plain and simple. Letâs hope they donât run out of money before they figure it out. So while increasing debt without sufficient productivity to pay for it is bad. Itâs not âhow we got hereâ. There are things out there that are much much worse!